Critical aspects of Business Rates and Council Tax for Purpose Built Student Accommodation (PBSA)

Purpose-Built Student Accommodation (PBSA) plays a vital role in meeting the housing needs of students across the UK. For developers, understanding the financial and operational aspects of PBSA is crucial to creating successful and sustainable projects.?

Central to this understanding are the considerations surrounding Business Rates and Council Tax, which have significant implications for financial planning and operational costs. This article delves into these key aspects, providing clarity on how developers can navigate these frameworks effectively.?(You can also download our full brochure on this topic).

PBSA Council Tax?

Full-time student exemptions?

In most cases, purpose-built student accommodation (PBSA) is exempt from council tax if it is occupied solely by full-time students. Developers should ensure that all tenants meet the local council’s criteria for student status. By confirming eligibility and maintaining proper documentation, developers can uphold these exemptions and avoid unnecessary complications.?

Providing tenants with guidance on how to confirm their student status with local councils will streamline this process and ensures compliance, whilst enhancing tenant satisfaction and making the property more attractive to prospective students.?

Mixed Tenancy?

If any non-students (such as part-time students or working individuals) live in the accommodation, the property could become liable for Council Tax, or a discount may apply. Developers need to assess how this might impact mixed-use or flexible tenancy developments. Understanding these dynamics is essential for financial planning, as mixed tenancy arrangements can introduce additional costs or administrative challenges.?

Vacancy Periods?

During periods when accommodation is unoccupied (such as summer breaks), it’s important to understand whether the property becomes liable for Council Tax. Developers must account for these potential liabilities in their financial projections and explore options to mitigate them where possible.?

By planning ahead for seasonal vacancies, developers can put strategies in place to reduce liability, such as leveraging short-term lets or temporary exemptions.?

On-site Staff Housing?

If the accommodation includes units for on-site staff, such as security or maintenance personnel, these units may be liable for Council Tax unless the staff also qualify for exemptions. Developers need to factor this into their planning and can work with councils to explore whether staff roles meet criteria for tax relief. Proper classification of these units helps maintain overall financial stability for the property.?

PBSA Business Rates?

Communal Areas

Business Rates are another critical consideration for PBSA, particularly for communal spaces within the development. PBSA often includes shared facilities like common rooms, gyms, and study areas, which can be subject to Business Rates. If part of the property is let for short-term holiday lets, then this is also likely to realise a business rates charge. Developers should account for these costs, which are often the responsibility of the landlord or property owner.?

Rates Relief?

Developers may be able to apply for certain Business Rates relief on some communal spaces or temporarily unoccupied parts of the building. Understanding the eligibility for such reliefs can reduce costs and improve financial viability.?

Commercial Spaces?

Retail or Commercial Units?

If the student accommodation includes commercial spaces (such as shops, cafes, or other retail units on the ground floor), these spaces will likely be subject to Business Rates. Developers need to factor in these costs, which will apply irrespective of the students’ Council Tax exemptions.?

Incorporating retail or commercial units within PBSA developments can provide additional revenue streams but requires careful financial planning. Developers must balance these opportunities against the associated tax liabilities, ensuring that commercial spaces enhance rather than detract from the project’s financial performance.?

Business Rates Valuation?

It’s important to get the correct Business Rates valuation for these units. Higher rateable values will increase the property’s liability, so seeking advice from a rating advisor can ensure valuations are accurate and opportunities for relief are maximised.?

Accurate valuations not only reduce costs but also provide clarity for long-term financial planning. Engaging experts early in the development process can streamline this aspect and mitigate potential risks associated with overvaluation.?

Vacant Property?

Empty Buildings or Rooms?

When parts of the property (such as entire blocks or rooms) remain vacant for a period, developers should be aware that they may become liable for Business Rates after a certain time. Properties are usually exempt from Business Rates for the first three months they are empty, after which full rates may apply.?

Developers can explore temporary exemptions or repurposing strategies to reduce liabilities. At QuoinStone, we work with a charity called The Artist’s Window as a creative solution to meaningfully and ethically occupy appropriate properties whilst also benefitting from charitable relief.?

Exemptions for Student Accommodation?

PBSA specifically built for students may qualify for exemptions or reductions, so it’s critical to clarify this with local authorities. Early engagement with councils ensures developers can leverage these benefits effectively.?

Other Considerations?

Business Rates Revaluation?

Developers should be aware that the government periodically revalues properties for Business Rates. These revaluations can change liabilities, especially if the property is located in an area experiencing rapid development or price increases. Developers should monitor revaluation cycles and be prepared to appeal if they believe, or there is evidence, the property has been overvalued.?

Appealing Business Rates?

After the Valuation Office Agency (VOA) assesses the property, developers can appeal the rateable value if they believe it is too high. Engaging a rating expert may help reduce Business Rates through the appeals process.?

Seasonal and Temporary Changes?

Term-time vs. Non-term-time Occupancy?

Developers should consider whether the property is only occupied during term time or year-round. If accommodation is vacant for extended periods (such as summer), this could affect Council Tax and Business Rates liabilities. Some councils offer exemptions or reductions for student accommodation that is unoccupied during non-term times.?

Local Discretionary Policies?

Some local authorities have discretionary policies that can offer relief or exemptions on Council Tax and Business Rates for student accommodation. Developers should engage with the local council early in the planning process to understand the specific policies that might apply.?

Community Infrastructure Levy (CIL) Contributions?

Though not directly related to Business Rates or Council Tax, developers should also consider CIL contributions, which can apply to new student accommodation projects in certain areas. Accounting for these contributions ensures comprehensive financial planning.?

Conclusion: Navigating Taxation Challenges in PBSA Development?

Business Rates and Council Tax frameworks significantly influence the financial landscape of PBSA developments. For developers, understanding and leveraging exemptions, reliefs, and local policies is crucial to optimising costs and maintaining compliance. By adopting a proactive and informed approach, developers can navigate these challenges effectively, ensuring the long-term success and sustainability of their projects.?

At QuoinStone, we can assist and advise on all the scenarios covered in this article. If you would like to discuss an existing, or upcoming, PBSA development, please get in touch with our team to arrange a free call.?

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